Lending service Fundbox, which bills itself as the go-to solution for businesses seeking to improve their cash flow, is growing at a remarkably fast pace.
On Thursday, the company, which was founded in 2014, announced that it secured $50 million in an equity funding round led by Spark Capital Growth. Bezos Expeditions, which is the personal investing arm of Amazon CEO Jeff Bezos, also participated, alongside Ashton Kutcher's Sound Ventures.
Earlier this year in March, Fundbox raised $40 million in a Series B round of funding, scoring investments from high-profile investors like Khosla Ventures and General Catalyst Partners. To date, Fundbox has raised over $100 million.
It's perhaps not surprising that venture capitalists are hungry for a piece of the market, which caters to companies that are too new or too risky to interest banks and traditional lenders. Fundbox claims to be doubling revenue growth each quarter, with a model that founder Eyal Shinar fittingly likens to Amazon, at least within its sector.
"Bezos' overall thesis when it comes to Amazon was [to] try to build a common sense solution that leveraged new technology," he tells Inc. "That's not too dissimilar to what we're doing today."
The idea is simple enough -- although, not particularly new. Fundbox will advance clients the money for outstanding invoices, and takes a clearing fee in return (the fee is dependent on the size of the invoice, and the overall health of the client's startup.) Businesses can pay off the fee over the course of three months.
Unlike merchant lenders, though, Fundbox leverages an easy-to-use algorithm which evaluates risk independently, and works to detect fraudulent charges, for example, by picking up on whether an IP address and computer match up. Fundbox can process your invoices within seconds, as opposed to months. The majority of the company's employees are engineers, many of whom had previously served as Israeli intelligence agents.
"Fundbox is uniquely positioned to help small businesses address their key issue -- managing cash flow -- without all the usual hoop-jumping and delays," said Jeremy Philips, the general partner at Spark Capital Growth, in a press release announcing the funding.
Before you liken Fundbox to an alternative online lending firm, such as OnDeck Capital, consider that Fundbox only targets clients that cater to other companies. "The market is 25 times bigger. It's less visible and it's less sexy so it has less innovation going into it," says Shinar.
OnDeck, for reference, has processed north of $2 billion in loans, but it also focuses on consumer businesses, which tend to rely less on invoices. The company went public in December of last year, hitting the markets at a staggering $1.3 billion valuation.
To use Fundbox, businesses must register for the service, and then integrate their own software system with the Fundbox network. At present, Shinar estimates that there are millions of users registered on the platform, although only a fraction of those -- a figure in the "tens of thousands," he tells me -- are active and paying. As of August, Fundbox had processed 15 million total invoices.
"I like the fact that Fundbox doesn't buy the invoices and charge ridiculous fees," writes JaFreda Brown, CEO of Brown Accounting Solutions, in a review on the company's website. "It's only a short term advance to cover the gaps, and we pay it back as our clients pay us."
As experts note, there are risks associated with entering this niche marke. For one thing, alternative lenders are (quite literally) banking on the fact that their clients won't default. "On the face of it, everyone can give away money," says Shinar. "The question is: Can you get it back?"
He insists that Fundbox's data-mining hardware is enough to bring in customers -- who are willing to fork over the associated transaction fee -- while also reducing the back-end costs that typical credit officers would incur.
Fundbox processes invoices as low as $100, and up to $50,000, and claims to be profitable on a per-transaction basis.
Shinar, who was born and raised in Israel, says that he was an unlikely entrepreneur. The inspiration for Fundbox came when his mother's local staffing firm struggled to stay afloat. It turned revenues, but never counted enough cash.
Ultimately, the startup's aggressive goal speaks to the promise of the financial technology sector at large: "Let's make accessing capital like ordering an Uber."